annual audit reportnot submitted to coa for mandatory post audit and custody contrary to sections...
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Republic of the Philippines
COMMISSION ON AUDIT
Commonwealth Avenue, Quezon City
ANNUAL AUDIT REPORT
on the
SULTAN KUDARAT WATER DISTRICT Tacurong City, Sultan Kudarat
For the Year Ended December 31, 2017
May 28, 2018
ENGR. JOSE D. TABUGA, JR.
General Manager
Sultan Kudarat Water District
Tacurong City, Sultan Kudarat
Dear GM Tabuga,
We transmit herewith the Annual Audit Report on the audit of the
accounts and operations of the Sultan Kudarat Water District, Tacurong City,
Sultan Kudarat for the year ended December 31, 2017, in compliance with
Section 2, Article IX-D of the Philippine Constitution and pertinent provision of
Section 43 of Presidential Decree No. 1445. The audit was conducted in
accordance with applicable legal and regulatory requirements and generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain a reasonable basis for our conclusions.
The audit was conducted to (a) verify the level of assurance that may be
placed on management’s assertions on the financial statements; (b) recommend
agency improvement opportunities; and (c) determine the extent of
implementation of prior year’s audit recommendations.
An unmodified opinion on the fairness of the presentation of the financial
statements as of December 31, 2017 has been rendered.
Summarized below are the significant findings noted during the audit. The
details and other findings and observations as well as the corresponding
recommendations are discussed in the audit observations and recommendations
portion of the report:
1. Property Plant and Equipment amounting to P172,324,513.54 could
not be ascertained as to its existence, validity and accuracy due to the
non-conduct of physical count.
2. Unserviceable Properties reclassified to Other Assets account totaling
P2,423,941.19 were not adequately supported with required reports
and were not disposed of as of the appropriate time.
Republic of the Philippines
COMMISSION ON AUDIT Regional Office No. XII
9506Koronadal City, Philippines
3. Eighty Six (86) disbursement vouchers for CY 2017 in the total
amount of ₱11,559,456.23 were not submitted to COA for mandatorypost audit and custody.
4. Deficiencies in Public/Competitive Bidding procedures due to non-
adherence to the Government Procurement Reform Act (RA 9184) and
its Implementing Rules and Regulations were observed, thereby
casting doubt to the propriety and regularity of procured goods and
services totaling ₱19,783,642.20.
5. Contracts, Purchase Orders and all other documents forming part
thereof were not submitted on time for auditorial review.
6. Monthly Report of Accountability for Accountable Forms (RAAF)
was not prepared and submitted.
7. The District registered an average Non-Revenue Water (NRW) of
16.06 percent for CY 2017 which is within the 20 percent acceptable
level of NRW as required under LWUA Resolution No. 444, series of
2009 and LWUA Memorandum Circular No. 004-10.
We request that the observations and recommendations contained in the
report be fully addressed, and we would appreciate being informed of the actions
taken in this regard within sixty (60) days from the receipt hereof, using the
attached Agency Action Plan and Status of Implementation (AAPSI) Form.
We acknowledge the cooperation extended to our Auditors by the officials
and employees of Sultan Kudarat Water District.
Very truly yours,
ATTY. SUSAN P. DONALVO
Director IV
Regional Director
Copy Furnished:
The President, Republic of the Philippines
The Vice-President, Republic of the Philippines
The Senate President, Republic of the Philippines
The Speaker of the House, Republic of the Philippines
The Chairperson, Senate Finance Committee
The Chairperson, Appropriations Committee
The Secretary, Department of Budget and Management
The Administrator, Local Water Utilities Administration
Presidential Management Staff, Office of the President
National Library (soft copy)
UP Law Center (soft copy)
COA Commission Central Library (soft copy)
May 28, 2018
THE BOARD OF DIRECTORS
Sultan Kudarat Water District
Tacurong City, Sultan Kudarat
Sirs/Mesdames,
We transmit herewith the Annual Audit Report on the audit of the
accounts and operations of the Sultan Kudarat Water District, Tacurong City,
Sultan Kudarat for the year ended December 31, 2017, in compliance with
Section 2, Article IX-D of the Philippine Constitution and pertinent provision of
Section 43 of Presidential Decree No. 1445. The audit was conducted in
accordance with applicable legal and regulatory requirements and generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain a reasonable basis for our conclusions.
The audit was conducted to (a) verify the level of assurance that may be
placed on management’s assertions on the financial statements; (b) recommend
agency improvement opportunities; and (c) determine the extent of
implementation of prior year’s audit recommendations.
An unmodified opinion on the fairness of the presentation of the financial
statements as of December 31, 2017 has been rendered.
Summarized below are the significant findings noted during the audit.
Thedetails and other findings and observations as well as the corresponding
recommendations are discussed in the audit observations and recommendations
portion of the report:
1. Property Plant and Equipment amounting to P172,324,513.54 could
not be ascertained as to its existence, validity and accuracy due to the
non-conduct of physical count.
2. Unserviceable Properties reclassified to Other Assets account totaling
P2,423,941.19 were not adequately supported with required reports
and were not disposed of as of the appropriate time.
3. Eighty Six (86) disbursement vouchers for CY 2017 in the total
amount of ₱11,559,456.23 were not submitted to COA for mandatorypost audit and custody.
Republic of the Philippines
COMMISSION ON AUDIT Regional Office No. XII
9506Koronadal City, [email protected]
4. Deficiencies in Public/Competitive Bidding procedures due to non-
adherence to the Government Procurement Reform Act (RA 9184) and
its Implementing Rules and Regulations were observed, thereby
casting doubt to the propriety and regularity of procured goods and
services totaling ₱19,783,642.20.
5. Contracts, Purchase Orders and all other documents forming part
thereof were not submitted on time for auditorial review.
6. Monthly Report of Accountability for Accountable Forms (RAAF)
was not prepared and submitted.
7. The District registered an average Non-Revenue Water (NRW) of
16.06 percent for CY 2017 which is within the 20 percent acceptable
level of NRW as required under LWUA Resolution No. 444, series of
2009 and LWUA Memorandum Circular No. 004-10.
We request that the observations and recommendations contained in the
report be fully addressed, and we would appreciate being informed of the actions
taken in this regard within sixty (60) days from the receipt hereof, using the
attached Agency Action Plan and Status of Implementation (AAPSI) Form.
We acknowledge the cooperation extended to our Auditors by the officials
and employees of Sultan Kudarat Water District.
Very truly yours,
ATTY. SUSAN P. DONALVO
Director IV
Regional Director
Copy Furnished:
The President, Republic of the Philippines
The Vice-President, Republic of the Philippines
The Senate President, Republic of the Philippines
The Speaker of the House, Republic of the Philippines
The Chairperson, Senate Finance Committee
The Chairperson, Appropriations Committee
The Secretary, Department of Budget and Management
The Administrator, Local Water Utilities Administration
Presidential Management Staff, Office of the President
National Library (soft copy)
UP Law Center (soft copy)
COA Commission Central Library (soft copy)
SKWD AAPSI 2017 AAR
Page 1 of 9
SULTAN KUDARAT WATER DISTRICT
TACURONG CITY, SULTAN KUDARAT
AGENCY ACTION PLAN and STATUS OF IMPLEMENTATION
Audit Observation and Recommendations
As of December 31, 2017
Agency Action Plan
Target
No REF AUDIT
OBSERVATIONS
Audit Recommendations Action
Plan
Person/Dept.
Responsible
From To Status of
Implementation
2017
1 Pages
19-20,
Part II of
CY 2017
AAR
Property Plant and
Equipment amounting
to P172,324,513.54
could not be
ascertained as to its
existence, validity and
accuracy due to the
non-conduct of
physical count
contrary to Sec. 490
of GAAM Volume 1,
thereby casting doubt
on the fairness of the
financial statements’presentation.
We recommended that
Management: a) require the
Property Department to
constantly monitor and
prepare the necessary reports
vis-à-vis physical count of
PPEs in conformity with the
above mentioned provisions;
b) cause regular
reconciliation of records
between the Property Unit
and the Accounting Division
to detect errors, if any and
effect necessary correction in
the affected records for the
fair presentation of PPE
accounts in the Financial
Statements.
2 Pages
20-23,
Part II of
CY 2017
AAR
Unserviceable
Properties reclassified
to Other Assets
account totaling
P2,423,941.19 were
not adequately
We recommended that
Management:
a. take appropriate action
on the insufficiency of
personnel in the Property
Department in order to
SKWD AAPSI 2017 AAR
Page 2 of 9
Agency Action Plan
Target
No REF AUDIT
OBSERVATIONS
Audit Recommendations Action
Plan
Person/Dept.
Responsible
From To Status of
Implementation
supported with
required reports and
were not disposed of
as of the appropriate
time contrary to
Section 64, Volume II
of the NGAS Manual,
Section 79 of PD
1445 and COA
Circular No. 89-296,
thus exposing them to
further physical
deterioration, decline
in economic value
and depriving the
government from the
potential benefits had
the immediate
disposal of these
properties been
effected.
enhance the monitoring
system on asset
utilization, reporting and
disposal;
b. instruct the Property
Department and the
Inventory Committee to
initiate the conduct of
physical count of PPEs
and prepare the Report
on Physical Count of
PPE in order to
determine the actual
existence and condition
of the properties and
shall be used as basis of
reconciliation of records
with the Accounting
Unit;
c. instruct the Property
Unit and the Appraisal &
Disposal Committee to
conduct the physical
count of unserviceable
properties, prepare the
Inventory and Inspection
Report of Unserviceable
Properties and undertake
immediate disposal of
unserviceable properties
in accordance with the
procedures prescribed
under Section 79 of
SKWD AAPSI 2017 AAR
Page 3 of 9
Agency Action Plan
Target
No REF AUDIT
OBSERVATIONS
Audit Recommendations Action
Plan
Person/Dept.
Responsible
From To Status of
Implementation
Presidential Decree 1445
and COA Circular 89-
296; and
d. instruct the Accounting
Unit to record the
disposal of unserviceable
properties by dropping
from the books of
accounts the related
Asset accounts.
3 Pages
23-25,
Part II of
CY 2017
AAR
Eighty Six (86)
disbursement
vouchers for CY 2017
in the total amount of
₱11,559,456.23 were
not submitted to COA
for mandatory post
audit and custody
contrary to Sections
100 and 122 of PD
1445 and COA
Circular Nos. 2009-
006 and 95-006 ,
hence Management’sassertions of
occurrence, accuracy,
validity and
completeness of
financial transactions
cannot be ascertained
and thereby depriving
the end users of the
We recommended that
Management:
a) cause the immediate
submission of the eighty
(86) check vouchers with
complete supporting
documents;
b) direct the accountable
officer to monitor and
ensure that the required
documents are readily
available to support the
disbursement
transactions; and
c) adhere strictly on the
prescribed timeline in the
submission of
disbursement vouchers
with the supporting
documents to the Auditor
pursuant to COA rules
and regulations.
SKWD AAPSI 2017 AAR
Page 4 of 9
Agency Action Plan
Target
No REF AUDIT
OBSERVATIONS
Audit Recommendations Action
Plan
Person/Dept.
Responsible
From To Status of
Implementation
financial statements
on the timely and
relevant information.
4 Pages
25-28,
Part II of
CY 2017
AAR
Deficiencies in
Public/ Competitive
Bidding procedures
due to non-adherence
to the Government
Procurement Reform
Act (RA 9184) and its
Implementing Rules
and Regulations were
observed, thereby
casting doubt to the
propriety and
regularity of procured
goods and services
totaling
₱19,783,642.20.
We have recommended that
Management ensure that all
procurement transactions/
pertaining to
Competitive/Public Bidding
are in accordance with the
prescribed procedures as
stipulated in the 2016
Revised Implementing Rules
and Regulations of RA 9184.
5 Pages
29-30,
Part II of
CY 2017
AAR
Contracts, Purchase
Orders and all other
documents forming
part thereof were not
submitted on time for
auditorial review
contrary to COA
Circular No. 2009-
001 , thus casting
doubt on the propriety
and reasonableness of
the procurement
We recommended that
Management install measures
that will facilitate the timely
submission of Contracts
and/or Purchase Orders
together with the related
supporting documents within
the reglementary period to
facilitate auditorial review,
technical evaluation and
inspection pursuant to COA
Circular No. 2009-001.
SKWD AAPSI 2017 AAR
Page 5 of 9
Agency Action Plan
Target
No REF AUDIT
OBSERVATIONS
Audit Recommendations Action
Plan
Person/Dept.
Responsible
From To Status of
Implementation
transactions and
depriving the
Management from the
prompt information
on the results of
auditorial review,
technical evaluation
and inspection.
6 Pages
30-31,
Part II of
CY 2017
AAR
Monthly Report of
Accountability for
Accountable Forms
(RAAF) was not
prepared and
submitted contrary to
Section 68, Volume II
of the New
Government
Accounting System
(NGAS) Manual and
Section 98 of
Government
Accounting and
Auditing Manual
(GAAM) ), thus
resulting in weak
monitoring system on
the movement and
status of accountable
forms.
We recommended that
Management instruct the
Accountable Officers to
strictly comply with the
preparation and submission
of the monthly RAAF as
basis for monitoring the
movement of accountable
forms at their possession to
ensure reliability of the
monthly balances of
inventory.
7 Pages
31-32,
The District
registered an average
We commended
Management for diligently
SKWD AAPSI 2017 AAR
Page 6 of 9
Agency Action Plan
Target
No REF AUDIT
OBSERVATIONS
Audit Recommendations Action
Plan
Person/Dept.
Responsible
From To Status of
Implementation
Part II of
CY 2017
AAR
Non-Revenue Water
(NRW) of 16.06
percent for CY 2017
which is within the 20
percent acceptable
level of NRW as
required under
LWUA Resolution
No. 444, series of
2009 and LWUA
Memorandum
Circular No. 004-10.
maintaining its NRW for CY
2017 within the acceptable
level as prescribed by
LWUA Memorandum
Circular. We have
recommended however, that
Management continue to
exert more efforts in ensuring
lower NRW rate through (a)
checking water meters and
immediately replacing worn
out or defective ones; (b)
ensuring immediate and
prompt repair of identified
leaks; and (c) identifying
and penalizing
concessionaires who do
illegal tapping and
permanently disconnect their
water service.
PRIOR YEARS
8 CY 2016
AAR
Deficiencies in
Public/Competitive
Bidding procedures
were observe due to
non-adherence to the
Government
Procurement Reform
Act (RA 9184) and its
Implementing Rules
and Regulations,
thereby casting doubt
We have recommended that
Management ensure that all
transactions/activities
pertaining to
Competitive/Public Bidding
are in accordance with the
prescribed procedures are
stipulated in the 2016
Revised Implementing Rules
and Regulations of RA 9184
SKWD AAPSI 2017 AAR
Page 7 of 9
Agency Action Plan
Target
No REF AUDIT
OBSERVATIONS
Audit Recommendations Action
Plan
Person/Dept.
Responsible
From To Status of
Implementation
to the propriety and
regularity of procured
goods and services
totaling
P27,436522.47.
9 CY 2015
AAR
The propriety and
legality of various
charges imposed by
the District to its
concessionaires
cannot be ascertained
because these charges
were not subjected to
review and approval
of LWUA as provided
under Section 63 of
Presidential Decree
198 as amended.
We recommended that
Management submit to
LWUA the various imposed
charges for their review and
approval to establish
compliance with the
provisions prescribed under
Section 63 of PD 198.
10 CY 2015
AAR
The necessity,
propriety and legality
of hiring Services/Job
Orders in the District
is questionable
because Section 2
Rule XI of the
Omnibus Rules
implementing Book V
of Executive Order
(EO) No. 292, Section
209 to 211 and 517,
Volume I of the
We recommended that
Management
recommend to the
Board of Directors to
issue policy guidelines
in the hiring of job
order in accordance
with Section 2 Rule XI
of the Revised
Omnibus Rules
Implementing Book V
of EO No. 292 and
SKWD AAPSI 2017 AAR
Page 8 of 9
Agency Action Plan
Target
No REF AUDIT
OBSERVATIONS
Audit Recommendations Action
Plan
Person/Dept.
Responsible
From To Status of
Implementation
GAAM were not
strictly followed. COA rules and
regulations cited
above;
plan and evaluate
further on how to
achieve the ideal and
realistic personnel
complement of the
District instead of
resorting to Job Order
as scheme:
evaluate the
performance and skills
of the said job order
personnel that belongs
to Category II and III
as provided under Civil
Service Commission
Memorandum Circular
No. 10, series of 2013
or the Skills Eligibility
for possible
appointment to
permanent regular
positions, if merited;
and
prioritize hiring
plumbers of regular
status in the District.
SKWD AAPSI 2017 AAR
Page 9 of 9
Agency Action Plan
Target
No REF AUDIT
OBSERVATIONS
Audit Recommendations Action
Plan
Person/Dept.
Responsible
From To Status of
Implementation
11 CY 2014
AAR
The existence,
accuracy and validity
of the Accounts
Receivables and
Guaranty Deposit
Payable accounts
totaling to P8.98
million and P1.05
million , respectively
cannot be fully
established due to
absence of details and
not fully supported
with subsidiary
ledgers/schedules and
the existence of
Guaranty Deposits
Payable totaling to
P1.05 million which
have been dormant
for more than five
years affect the true
financial condition of
the District.
We recommended that
management,
Expedite the
installation of an IT
system that will link
the accounting records
with the billing and
collection records.
Exert more effort to
locate all the
documents that will
support the balances of
the Guaranty Deposits
Payable account;
Confirm from the list
of the creditors
whether the payables
are still valid and
legitimate obligation of
the agency
Executive summary _______________________________________________________________________
EXECUTIVE SUMMARY
Introduction
The Sultan Kudarat Water District (SKWD) was established thru
Sangguniang Bayan Resolution No.82-66 dated October 22, 1982 of the
Sangguniang Bayan of the Province of Sultan Kudarat with Presidential Decree
No. 198, as the enabling law to the creation of water districts. On August 5, 1983,
the District was issued the Conditional Certificate of Conformance (CCC No.
247) by the Local Water Utilities Administration (LWUA).
As of December 31, 2017 the District has a total workforce of 75
regular employees. The office is headed by Engr. Jose D. Tabuga Jr., General
Manager.
Audit Scope and Methodology
Pursuant to Section 2, Article IX-D of the Philippine Constitution and
Section 43 of the Government Auditing Code of the Philippines (P.D. 1445), we
have audited the accounts and operations of the District covering the period
January 1 to December 31, 2017.
The audit was conducted to (a) verify the level of assurance that may be
placed on management’s assertions on the financial statements; (b) recommend
agency improvement opportunities; and (c) determine the extent of
implementation of prior years’ audit recommendations.
.
Financial Highlights
The financial profiles of the District for CY 2017 with comparative figures
of CY 2016 are presented as follows: (All amounts in Philippine Pesos unless
otherwise stated)
A. Financial Condition
B. Results of Operation
Particulars 2017 2016 Increase/(Decrease)
Amount Percentage Gross
Income 125,989,047.61 121,923,856.96 4,065,190.65 3%
Particulars 2017 2016 Increase/(Decrease)
Amount Percentage Assets Liabilities Equity
325,379,347.82
47,753,558.53
277,625,789.29
295,652,571.61
45,007,657.07
250,644,914.54
29,726,776.21
2,745,901.46
26,980,874.75
10%
6%
11%
Executive summary ______________________________________________________________________
Particulars 2017 2016 Increase/(Decrease)
Amount Percentage Less:
Expenses
PS 42,696,545.97 41,096,769.63 1,599,776.34 4%
MOOE 39,023,892.29 35,316,867.74 3,707,024.55 10%
Non-Cash
Expenses 15,429,558.99 12,145,670.72 3,283,888.27 27%
Financial
Expenses 646,361.47 1,702,534.83 (91,771.14) (12%)
Total
Expenses 97,796,358.72 89,297,440.70 8,498,918.02 10%
Net Income 28,192,688.89 31,662,014.04 (4,433,727.37) (14%)
Audit Opinion on the Financial Statements
The Auditor rendered an unmodified opinion on the fairness of the
presentation of the financial statements of Sultan Kudarat Water District as of
December 31, 2017.
Summary of Significant Audit Observations and Recommendations
1. Property Plant and Equipment amounting to P172,324,513.54 could not be
ascertained as to its existence, validity and accuracy due to the non-conduct of
physical count.
We have recommended that Management: a) require the Property Department
to constantly monitor and prepare the necessary reports vis-à-vis physical
count of PPEs in conformity with the above mentioned provisions; b) cause
regular reconciliation ofrecords between the Property Unit and the Accounting
Division to detect errors, if any and effect necessary correctionin the affected
records for the fair presentation of PPE accounts in the Financial Statements.
2. Unserviceable Properties reclassified to Other Assets account totaling
P2,423,941.19 were not adequately supported with required reports and were
not disposed of as of the appropriate time.
We have recommended that Management:
a. take appropriate action on the insufficiency of personnel in the
Property Department in order to enhance the monitoring system on
asset utilization, reporting and disposal;
b. instruct the Property Department and the Inventory Committee to
initiate the conduct of physical count of PPEs and prepare the Report
on Physical Count of PPE in order to determine the actual existence
and condition of the properties and shall be used as basis of
reconciliation of records with the Accounting Unit;
Executive summary ______________________________________________________________________
c. instruct the Property Unit and the Appraisal & Disposal Committee to
conduct the physical count of unserviceable properties, prepare the
Inventory and Inspection Report of Unserviceable Properties and
undertake immediate disposal of unserviceable properties in
accordance with the procedures prescribed under Section 79 of
Presidential Decree 1445 and COA Circular 89-296; and
d. instruct the Accounting Unit to record the disposal of unserviceable
properties by dropping from the books of accounts the related Asset
accounts.
3. Eighty Six (86) disbursement vouchers for CY 2017 in the total amount of
₱11,559,456.23 were not submitted to COA for mandatory post audit and
custody contrary to Sections 100 and 122 of PD 1445 and COA Circular Nos.
2009-006 and 95-006.
We have recommended that Management: a) cause the immediate submission
of the eighty (86) check vouchers with complete supporting documents; b)
direct the accountable officer to monitor and ensure that the required
documents are readily available to support the disbursement transactions; and
c) adhere strictly on the prescribed timeline in the submission of disbursement
vouchers with the supporting documents to the Auditor pursuant to COA rules
and regulations.
4. Deficiencies in Public/Competitive Bidding procedures due to non-adherence
to the Government Procurement Reform Act (RA 9184) and its Implementing
Rules and Regulations were observed, thereby casting doubt to the propriety
and regularity of procured goods and services totaling ₱19,783,642.20.
We have recommended that Management ensure that all procurement transactions/activities pertaining to Competitive/Public Bidding are in
accordance with the prescribed procedures as stipulated in the 2016 Revised
Implementing Rules and Regulations of RA 9184.
5. Contracts, Purchase Orders and all other documents forming part thereof were
not submitted on time for auditorial review contrary to COA Circular No.
2009-001.
We have recommended that Management install measures that will facilitate
the timely submission of Contracts and/or Purchase Orders together with the
related supporting documents within the reglementary period to facilitate
auditorial review, technical evaluation and inspection pursuant to COA
Circular No. 2009-001.
6. Monthly Report of Accountability for Accountable Forms (RAAF) was not
prepared and submitted contrary to Section 68, Volume II of the New
Government Accounting System (NGAS) Manual and Section 98 of
Government Accounting and Auditing Manual (GAAM).
We have recommended that Management instruct the Accountable Officers to
strictly comply with the preparation and submission of the monthly RAAF as
Executive summary ______________________________________________________________________
basis for monitoring the movement of accountable forms at their possession to
ensure reliability of the monthly balances of inventory.
7. The District registered an average Non-Revenue Water (NRW) of 16.06
percent for CY 2017 which is within the 20 percent acceptable level of NRW
as required under LWUA Resolution No. 444, series of 2009 and LWUA
Memorandum Circular No. 004-10.
We commended Management for diligently maintaining its NRW for CY
2017 within the acceptable level as prescribed by LWUA Memorandum
Circular. We have recommended however, that Management continue to
exert more efforts in ensuring lower NRW rate through (a) checking water
meters and immediately replacing worn out or defective ones; (b) ensuring
immediate and prompt repair of identified leaks; and (c) identifying and
penalizing concessionaires who do illegal tapping and permanently
disconnect their water service.
Summary of Total Suspensions, Disallowances and Charges as of Year-End
The total audit suspension, disallowances and charges found in the audit of
various transactions of the agency, as of December 31, 2017 is P3,302,952.20,
based on the Notice of Suspension (NS)/Notice of Disallowance(ND)/Notice of
Charge (NC) issued by this Commission, as summarized hereunder:
Particulars Suspensions Disallowances Charges Summary of Audit Suspensions,
Disallowances and Charges as of
December 31, 2016
P0.00 P3,302,952.20 P0.00
Add: Issuances 0.00 0.00 0.00 Less: Settlements
Prior Year 0.00 0.00 0.00 Current Year 0.00 0.00 0.00 Balance, December 31, 2017 P0.00 P3,302,952.20 P0.00
Status of Prior Years’ Unimplemented Audit Recommendations
Of the seven (7) prior year’s audit recommendations embodied in the Prior
Years’ Annual Audit Reports, four (4) were partially implemented and three (3)
were fully implemented.
PART I
AUDITED FINANCIAL STATEMENTS
TABLE OF CONTENTS
Part Subject Page No.
I. Audited Financial Statements
Independent Auditor’s Report 1
Statement of Management’s Responsibility for the Financial
Statements
3
Statement of Financial Position as of December 31, 2017
(With Comparative Figures for 2016)
4
Statement of Comprehensive Income for the year ended
December 31, 2017 (With Comparative Figures for 2016)
5
Statement of Changes in Equity for the year ended December
31, 2017 (With Comparative Figures for 2016)
6
Statement of Cash Flows for the year ended December 31,
2017 (With Comparative Figures for 2016)
7
Notes to Financial Statements 8
II. Audit Observations and Recommendations 19
III. Status of Implementation of Prior Years’ Unimplemented
Audit Recommendations
36
1
INDEPENDENT AUDITOR’S REPORT
The Board of Directors
Sultan Kudarat Water District
Tacurong City, Sultan Kudarat
We have audited the accompanying financial statements of Sultan Kudarat Water
District as at December 31, 2017, which comprise the statement of financial position,
statement of comprehensive income, statement of cash flows, and statement of changes in
equity for the year then ended, and a summary of significant accounting policies and
other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these
financial statements in accordance with Philippine Financial Reporting Standards and
generally accepted state accounting principles, and for such internal control as
management determines is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit in accordance with Philippine Public Sector Standards
on Auditing. Those standards require that we comply with ethical requirements and plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the financial statements. The procedures selected depend on
the auditor’s judgment, including the assessment of the risks of material misstatement of
the financial statements, whether due to fraud or error. In making those risk assessments,
the auditor considers internal control relevant to the entity’s preparation and fair
presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the
financial statements.
Republic of the Philippines COMMISSION ON AUDIT
Regional Office No. XII
OFFICE OF THE SUPERVISING AUDITOR CGS-A Water Districts & Other CGS Stand-Alone Agencies
9506Koronadal City, Philippines
2
We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our audit opinion.
Auditor’s Opinion
In our opinion, the financial statements present fairly, in all material respects, the
financial position of Sultan Kudarat Water District as at December 31, 2017, and its
financial performance and its cash flows for the year then ended in accordance with state
accounting principles
COMMISSION ON AUDIT
By:
VENCY T. VILLARIZA
State Auditor IV
OIC-Supervising Auditor
May 15, 2018
CGS-A Water District
3
Republic of the Philippines
SULTAN KUDARAT WATER DISTRICT
Bonifacio St., City of Tacurong
STATEMENT OF MANAGEMENT’S RESPONSIBILITY
FOR THE FINANCIAL STATEMENTS
The management of SULTAN KUDARAT WATER DISTRICT is responsible
for all information and representations contained in the accompanying Statement
of Financial Position as of December 31, 2017 and the related Statement of
Comprehensive Income, Statement of Changes in Equity and the Notes to
Financial Statements for the year then ended. The financial statements have been
prepared in conformity with Philippine Financial Reporting Standards and
generally accepted state accounting principles, and reflect amounts based on the
best estimates and informed judgment of management with appropriate
consideration to materiality.
In this regard, Management maintains a system of accounting and reporting which
provides for the necessary internal controls to ensure that transactions are
properly authorized and recorded, assets are safeguarded against unauthorized use
or disposition and liabilities are recognized.
The Commission on Audit, in pursuance of its mandate under Section 2, Article
IX-D of the Philippine Constitution and pertinent provisions of Presidential
Decree 1445, has audited the financial statements of the District in accordance
with laws, COA and INTOSAI standards has expressed its opinion on the fairness
of presentation upon completion of such examination.
Note 2017 2016
Cash and Cash Equivalents 4 102,368,504.03 97,295,848.32
Receivables – net 5 12,252,976.99 11,982,958.43
Inventories 6 11,185,090.84 10,358,240.32
Other Assets 8 178,152.59 174,536.29
125,984,724.45 119,811,583.36
Non-Current Assets
Property, Plant and Equipment – net 7 172,324,513.54 150,486,180.72
Other Assets 8 27,070,109.83 25,354,807.53
Total Non-Current Assets 199,394,623.37 175,840,988.25
TOTAL ASSETS 325,379,347.82 295,652,571.61
LIABILITIES AND GOVERNMENT EQUITY
Current Liabilities
Financial Liabilities 9 39,157,848.38 35,102,367.94
Bonds Payable-Domestic 10 708,874.41 534,779.53
Inter-agency Payable 11 501,637.02 672,219.88
Trust Liabilities 12 435,656.16 488,606.16
Total Current Liabilities 40,804,015.97 36,797,973.51
Long-Term Liabilities
Loans Payable-Domestic 13 6,911,004.45 8,171,145.45
Deferred Credits 14 38,538.11 38,538.11
Total Long-Term Liabilities 6,949,542.56 8,209,683.56
TOTAL LIABILITIES 47,753,558.53 45,007,657.07
GOVERNMENT EQUITY 15 277,625,789.29 250,644,914.54
TOTAL LIABILITIES & EQUITY 325,379,347.82 295,652,571.61
Total Current Assets
(See Accompanying Notes to Financial Statement )
ASSETS
Current Assets
SULTAN KUDARAT WATER DISTRICT
STATEMENT OF FINANCIAL POSITION
As of December 31, 2017
(With comparative figures for CY 2016)
(In Philippine Peso)
4
Note 2017 2016
Service Income 17 6,065,167.46 6,000,395.47
Business Income 17 119,923,880.15 115,923,461.49
125,989,047.61 121,923,856.96
Personal Services 18 42,696,545.97 41,096,769.63
Maintenance & Other Operating
Expenses19 39,023,892.29 35,316,867.74
Non-Cash Expenses 20 15,429,558.99 12,145,670.72
Financial Expenses 21 646,361.47 1,702,534.83
Total Expenses 97,796,358.72 90,261,842.92
NET INCOME/(LOSS) 28,192,688.89 31,662,014.04
Expenses
(See Accompanying Notes to Financial Statement )
Income
Total Income
SULTAN KUDARAT WATER DISTRICT
STATEMENT OF COMPREHENSIVE INCOME
For the Year Ended December 31, 2017
(With comparative figures for CY 2016)
(In Philippine Peso)
5
Note 2017 2016
Government Equity
Donated Capital 4,365,742.00 4,365,742.00
Retained Earnings/(Deficits) 16
Beginning Balance 246,279,172.54 214,617,158.50
Prior Year's Adjustments (1,211,814.14)
Net Income/(Loss) for the period 28,192,688.89 31,662,014.04
Ending Balance 273,260,047.29 246,279,172.54
TOTAL 277,625,789.29 250,644,914.54
Reserve/Restricted Capital
(See Accompanying Notes to Financial Statement )
SULTAN KUDARAT WATER DISTRICT
STATEMENT OF CHANGES IN EQUITY
As of December 31, 2017
(With comparative figures for CY 2016)
(In Philippine Peso)
6
2017 2016
Service Income 123,679,750.98 120,993,674.55
Business Income 1,926,373.71 2,101,466.79
Other Receipts 4,033,963.20 3,407,674.01
129,640,087.89 126,502,815.35
Payment of Personal Services 41,675,196.79 45,244,722.85
Payment of Maintenance & Other Operating
Expenses 23,353,980.73 16,208,900.30
Purchase of Inventories/Payment of Payables 54,690,371.57 49,636,048.70
Prepayments, Deposits and Deferred Charges 412,816.98 301,441.60
Others 985,720.71 966,467.12
Total Cash Outflows 121,118,086.78 112,357,580.57
Net Cash (Used in) Provided by Operating Activities 8,522,001.11 14,145,234.78
Interests and Dividends 275,664.82 297,756.51
275,664.82 297,756.51
Purchase/Acquisition of Property, Plant and
Equipment 1,850,298.22 886,532.00
Total Cash Outflows 1,850,298.22 886,532.00
Net Cash (Used in) Provided by Investing Activities (1,574,633.40) (588,775.49)
Loan Amortization 1,260,141.00 2,985,606.16
Financial Expenses 614,571.00 720,543.27
Total Cash Outflows 1,874,712.00 3,706,149.43
Net Cash (Used in) Provided by Financing Activities (1,874,712.00) (3,706,149.43)
Net Increase/(Decrease) in Cash and Cash
Equivalents5,072,655.71 9,850,309.86
Cash and Cash Equivalents, Beginning of Year 97,295,848.32 87,445,538.46
Cash and Cash Equivalents, End of Year 102,368,504.03 97,295,848.32
Cash Outflows
Cash Outflows
Cash Flow From Investing Activities
Cash Outflows
Cash Flow From Financing Activities
Cash Inflows
Total Cash Inflows
Total Cash Inflows
SULTAN KUDARAT WATER DISTRICT
STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2017
(With comparative figures for CY 2016)
(In Philippine Peso)
Cash Flow From Operating Activities
Cash Inflows
7
Notes to Financial Statements
__________________________________________________________________
8
NOTES TO FINANCIAL STATEMENTS
(All amounts in Philippine Pesos unless otherwise stated)
1. Agency Background
The Sultan Kudarat Water District was established thru Sangguniang Bayan
Resolution No. 82-66 dated October 22, 1982 of the Sangguniang Bayan of
the Province of Sultan Kudarat with Presidential Decree No. 198, as the
enabling law to the creation of water districts. On August 5, 1983, the District
was issued the Conditional Certificate of Conformance (CCC No. 247) by the
Local Water Utilities Administration (LWUA). The mandates of the District
are:
To acquire, install, improve, maintain and operate water supply and
distribution system for domestic , industrial, municipal and agricultural
uses for residents and lands within the boundaries of the district;
To provide, maintain and operate waste water collection treatment and
disposal facilities; and
To conduct such other functions and operations incidental to water
resource development, utilization and disposal within the district, as
necessary or incidental to said purpose.
The powers, privileges and duties of the District are exercised and performed
by and through the Board of Directors, as the policy-making body composed
of the following:
Chairman - Engr. Nonito P. Bernardo
Vice-Chairman - Atty. Kyndell A. Hilario,CPA
Treasurer - Mrs. Norma D. Griño
Secretary - Mr. Emiliano C. Pacardo
Auditor - Mr. Eduardo T. Tono
Day to day activities is executed by its General Manager, Engr. Jose D.
Tabuga, Jr. together with the other seventy five (75) permanent employees.
2. Statement of Compliance and Basis of Preparation of Financial
Statements
The financial statements have been prepared in accordance with the
Philippine Financial Reporting Standards (PFRS) in compliance with
Commission on Audit Resolution No. 2015-040 dated December 1, 2015 and
COA Circular Nos. 2015-010 and 2016-006 dated December 1, 2015 and
December 29, 2016, respectively.
Notes to Financial Statements
__________________________________________________________________
9
The financial statements have been prepared on the basis of historical cost, unless
stated otherwise. The Statement of Cash Flows is prepared using the direct
method.
3. Summary of Significant Accounting Policies
Property, Plant & Equipment are carried at cost less accumulated
depreciation which is computed using the straight line method based
on the estimated service lives of the property ranging from 1 to 30
years.
The cost of maintenance and repairs are charged to operations as
incurred. Major renewals and betterments which extend the lives of the
equipment are capitalized. The cost and related depreciation are
removed from the accounts when assets are retired and disposed of any
resulting gain or loss is credited or charged to current operations.
Allowance for doubtful accounts is set-up to provide for estimated
losses due to non-collection of accounts from customers based on
past experiences.
The District uses the accrual basis of accounting. Revenues are
recorded during the period in which the services are given/rendered
and expenses are recorded at the times these are incurred.
4. Cash and Cash Equivalents
This account includes cash deposits with banks, un-deposited collections of
collecting officers, un-liquidated cash advances ( including petty cash fund )
and cash equivalents, the details of which follows:
2017 2016
Cash – Collecting Officers 283,674.50 411,829.39
Cash in Bank-Local Currency, Current
Account 82,674,103.88 77,385,072.86
Cash in Bank-Local Currency, Savings
Account 2,855,649.71 3,287,375.09
Time Deposits-Local Currency 16,555.075.94 16,211,570.98
Total 102,368,504.03 97,295,848.32
Notes to Financial Statements
__________________________________________________________________
10
5. Receivables - Net
This account consists of the following:
2017 2016
Accounts Receivables 12,072,085.04 10,846,080.78
Less: Allowance for Doubtful Accounts (208,183.28) (176,392.81)
Accounts Receivables, Net 11,863,901.76 10,669,687.97
Receivables-Disallowance/Charges 374,908.93 1,311,066.61
Other Receivable 2,203.85 2,203.85
Due from Officers and Employees 9,848.50
Due from GOCCs' 2,113.95
Receivables 12,252,976.99 11,982,958.43
The Accounts Receivables includes all amounts due on open accounts arising
from services rendered to customers for water sales and incidental services.
The Receivables - Others are collectibles from customers for their unpaid
application fee balances and materials loan accounts. The Due from GOCC's
are collectibles from Lebak Water District (LWD) for BAC expenses during
LWD Public Bidding.
6. Inventories
This consists of the following:
2017 2016
Merchandise Inventory 854,810.12 2,079,131.10
Office Supplies Inventory 353,895.21 537,576.73
Accountable Forms Inventory 145,403.00 181,964.92
Medical, Dental and Laboratory Supplies
Inventory 235,401.43 202,280.98
Construction Materials Inventory 8,096,284.36 4,600,329.82
Other Supplies and Materials Inventory 1,499,296.72 2,756,956.77
Total 11,185,090.84 10,358,240.32
7. Property, Plant & Equipment
This account is composed of the following:
Property, Plant and Equipment 2017 2016
Land
Land 6,729,973.55 6,729,973.55
Land Improvements
Notes to Financial Statements
__________________________________________________________________
11
Property, Plant and Equipment 2017 2016
Other Land Improvements 6,027,655.05 5,603,928.36
Accumulated Depreciation-Other
Land Improvements (2,189,830.62) (1,694,549.00)
Infrastructure Assets
Water Supply Systems 134,345,170.21 122,718,918.98
Accumulated Depreciation-Water
Supply Systems (50,581,401.25) (43,882,289.51)
Power Supply Systems 5,045,120.52 4,670,120.52
Accumulated Depreciation-Power
Supply Systems (2,733,184.24) (2,171,968.36)
Buildings and Other Structures
Buildings 28,187,396.85 20,064,504.14
Accumulated Depreciation-
Buildings (4,624,933.89) (3,439,159.08)
Other Structures 3,409,275.86 3,202,459.15
Accumulated Depreciation-Other
Structures (787,280.91) (664,004.65)
Machinery and Equipment
Machinery 13,345,683.17 10,420,723.17
Accumulated Depreciation-
Machinery (5,596,322.54) (4,403,914.72)
Office Equipment 3,908,306.73 2,246,370.70
Accumulated Depreciation-Office
Equipment (2,274,582.52) (1,536,356.63)
Information and Communication
Technology Equipment 8,569,436.59 7,521,928.59
Accumulated Depreciation-
Information and Communication
Technology Equipment (5,632,997.74) (4,277,023.70)
Communication Equipment 1,706,681.12 1,423,681.12
Accumulated Depreciation-
Communication Equipment (969,750.70) (804,546.22)
Construction and Heavy
Equipment 1,808,209.00 1,808,209.00
Accumulated Depreciation-
Construction and Heavy
Equipment (1,370,750.36) (1,084,294.28)
Disaster Response and Rescue
Equipment 182,638.86 121,388.86
Accumulated Depreciation-
Disaster Response and Rescue
Equipment (126,811.52) (100,119.29)
Other Machinery and Equipment 4,426,351.53 4,398,351.53
Accumulated Depreciation-Other
Equipment (2,276,014.53) (1,871,668.62)
Notes to Financial Statements
__________________________________________________________________
12
Property, Plant and Equipment 2017 2016
Transportation Equipment
Motor Vehicles 14,371,862.95 10,559,142.95
Accumulated Depreciation-Motor
Vehicles (7,092,674.61) (5,770,358.44)
Furniture, Fixtures and Books
Furnitures and Fixtures 2,916,531.77 2,099,731.86
Accumulated Depreciation-
Furniture and Fixtures (1,682,017.58) (1,198,386.92)
Other Property, Plant and
Equipment
Other Property, Plant and
Equipment 2,266,149.24 1,753,055.24
Accumulated Depreciation-Other
Property, Plant and Equipment (1,564,136.75) (1,174,491.35)
Construction in Progress
Construction in Progress-
Infrastructure Assets 21,932,873.27 10,016,461.56
Construction in Progress-Buildings
and Other Structures 2,647,887.03 9,200,362.21
Total 172,324,513.54 150,486,180.72
8. Other Assets
This account consists of the following:
2017 2016
Other Assets- Current
Prepaid Insurance 142,199.60 138,583.30
Guaranty Deposits 35,952.99 35,952.99
Total Other Assets-Current 178,152.59 174,536.29
Other Assets- Non-Current
Items in Transit 24,646,168.64 22,930,866.34
Other Assets-Unserviceable Property 2,008,010.60 2,008,010.60
Other Assets-Idle Properties 415,930.59 415,930.59
Total Other Assets- Non- Current 27,070,109.83 25,354,807.53
Total 27,248,262.42 25,529,343.82
Prepaid Insurance pertains to the balance of insurance of various service
vehicles, Pump stations, office buildings, reservoirs and insurance premium of
employees. The Guaranty Deposit pertains to the meter deposits and advance
billing to SUKELCO. The Other Assets- Non- Current consists of Items in
Notes to Financial Statements
__________________________________________________________________
13
Transit and Other Asset which include Unserviceable Properties and Idle PPE
which the management intended to use in the future.
9. Financial Liabilities
This consists of the following:
2017 2016
Accounts Payable 30,400,996.28 27,519,739.47
Due to Officers and Employees 8,756,852.10 7,582,628.47
Total 39,157,848.38 35,102,367.94
10. Bonds Payable
This consists of the amount due to supplier for their bid security and
performance bond.
2017 2016
Bonds Payable 708,874.41 534,779.53
Total 708,874.41 534,779.53
11. Inter-Agency Payable
This consist of the amount due to other government agencies for withholding
from payments made to suppliers and employees
2017 2016
Due to BIR 501,637.02 672,219.88
Total 501,637.02 672,219.88
12. Trust Liabilities
This consists of:
2017 2016
Guaranty Security Deposits Payable 435,656.16 488,606.16
Total 435,656.16 488,606.16
The Guaranty Security Deposit Payable pertains to the remaining amount of
deposits made by concessionaires as guaranty, water and meter deposits.
Notes to Financial Statements
__________________________________________________________________
14
13. Loans Payable
This consists of loans availed from the LWUA for the different water system
projects as follows:
2017 2016
LA # 3-512 (LWUA 5,957,266.45 6,670,696.45
LA # 4-2512 (LWUA) 953,738.00 1,500,449.00
Total 6,911,004.45 8,171,145.45
14. Deferred Credits
Deferred Credits account pertains to payments made in advance of
concessionaires for installation of new connection.
2017 2016
Deferred Credits 38,538.11 38,538.11
Total 38,538.11 38,538.11
15. Government Equity
This represents the grants and donated capital were those existing water
system in Tacurong City turned over by the Municipal Government to Sultan
Kudarat Water District. Subsequent capital additions, such as subsidies, will
be added to this account.
16. Retained Earnings
Retained Earnings consist of the balance of accumulated earnings or losses of
Sultan Kudarat Water District.
2017 2016
Retained Earnings, Beginning Balance 246,279,172.54 214,617,158.50
Prior Period Adjustments (1,211,814.14)
Net Income (Loss) for the Period 28,192,688.89 31,662,014.04
Retained Earnings, Ending Balance 273,260,047.29 246,279,172.54
Notes to Financial Statements
__________________________________________________________________
15
17. Income
This consists of the following:
2017 2016
Service Income 6,065,167.46 6,000,395.47
Business Income 119,923,880.15 115,923,461.49
Total 125,989,047.61 121,923,856.96
18. Personal Services
This consists of the following:
Personnel Services 2017 2016
Salaries and Wages
Salaries and Wages-Regular 20,719,852.92 18,525,869.76
Salaries and Wages-Casual/Contractual 6,763,111.15 6,493,345.78
Total Salaries and Wages 27,482,964.07 25,019,215.54
Other Compensation
Personnel Economic Relief Allowance
(PERA) 1,874,000.00 1,787,120.78
Representation Allowance (RA) 423,625.00 448,250.00
Transportation Allowance (TA) 423,625.00 448,250.00
Clothing/Uniform Allowance 390,000.00 375,000.00
Productivity Incentive Allowance 1,521,402.00
Honoraria 679,662.00 657,702.00
Overtime and Night Pay 61,555.52 28,768.13
Year End Bonus 3,585,059.25 3,267,969.91
Cash Gift 390,000.00 371,500.00
Other Bonuses and Allowances 1,542,083.95 1,787,499.98
Total Other Compensation 9,369,610.72 10,693,462.80
Personnel Benefit Contributions
Retirement and Life Insurance Premium 2,706,033.97 2,470,836.60
Pag-IBIG Contributions 94,000.00 89,600.00
PhilHealth Contributions 233,737.50 218,625.00
Total Personnel Benefit
Contributions 3,033,771.47 2,779,061.60
Other Personnel Benefits
Terminal Leave Benefits 2,185,199.71 1,992,529.69
Other Personnel Benefits 625,000.00 612,500.00
Total Other Personnel Benefits 2,810,199.71 2,605,029.69
Total Personnel Services 42,696,545.97 41,096,769.63
Notes to Financial Statements
__________________________________________________________________
16
19. Maintenance and Other Operating Expense
This consists of the following:
Maintenance and Other Operating
Expense 2017 2016
Traveling Expense
Traveling Expense-Local 650,777.15 587,528.33
Total Traveling Expense 650,777.15 587,528.33
Training and Scholarship
Expenses
Training Expenses 650,199.75 562,682.10
Total Training and Scholarship
Expenses 650,199.75 562,682.10
Supplies and Materials Expenses
Office Supplies Expenses 626,357.80 473,295.91
Accountable Forms Expenses 158,945.11 171,257.05
Non-Accountable Forms
Expenses 31,357.09 0.00
Fuel, Oil and Lubricants
Expenses 1,212,778.66 1,086,983.64
Chemical and Filtering Supplies
Expenses 3,649,931.46 2,988,061.50
Other Supplies and Materials
Expenses 1,616,410.45 1,758,106.12
Total Supplies and Materials
Expenses 7,295,780.57 6,477,704.22
Utility Expenses
Water Expenses 211,216.35 193,977.60
Electricity Expenses 15,016,478.44 14,968,759.54
Total Utility Expenses 15,227,694.79 15,162,737.14
Communication Expenses
Postage and Courier Services 7,985.00 8,495.00
Telephone Expenses 224,201.67 218,755.14
Internet Subscription Expenses 71,616.24 71,067.61
Cable, Satellite, Telegraph and
Radio Expenses 30,479.61 26,826.12
Total Communication Expenses 334,282.52 325,143.87
Awards/Rewards, Prizes and
Indemnities
Awards/Rewards Expenses 234,987.14 62,675.00
Total Awards/Rewards, Prizes
and Indemnities 234,987.14 62,675.00
Notes to Financial Statements
__________________________________________________________________
17
Confidential, Intelligence and Extraordinary
Expenses
Extraordinary and Miscellaneous
Expenses 106,820.40 83,449.00
Total Confidential, Intelligence
and Extraordinary Expenses 106,820.40 83,449.00
Professional Services
Legal Services 57,300.00 48,000.00
Auditing Services 175,371.48 13,259.97
Total Professional Services 232,671.48 61,259.97
General Services
Janitorial Services 403,820.41 239,130.49
Security Services 3,139,371.75 3,052,690.40
Other General Services 117,077.94 64,552.00
Total General Services 3,660,270.10 3,356,372.89
Repairs and Maintenance
Repair and Maintenance-Land
Improvements 0.00 0.00
Repair and Maintenance-
Infrastructure Assets 1,820,809.35 1,629,947.77
Repair and Maintenance-
Buildings and Other Structures 208,884.62 186,045.31
Repair and Maintenance-
Machinery and Equipment 245,646.00 277,926.36
Repair and Maintenance-
Transportation Equipment 337,800.51 439,121.64
Repair and Maintenance-
Furniture and Fixtures 28,859.58 41,753.72
Repair and Maintenance-Service
Concession Assets 0.00 0.00
Repair and Maintenance-Other
Property, Plant and Equipment 167,090.26 303,259.74
Total Repairs and Maintenance 2,809,090.32 2,878,054.54
Taxes, Insurance Premiums and
Other Fees
Taxes, Duties and Licenses 2,580,248.87 2,378,709.31
Fidelity Bond Premiums 40,500.00 40,283.82
Insurance Expenses 409,200.68 337,666.12
Income Tax Expenses
Total Taxes, Insurance Premiums
and Other Fees 3,029,949.55 2,756,659.25
Notes to Financial Statements
__________________________________________________________________
18
Other Maintenance and
Operating Expenses
Advertising, Promotional and
Marketing Expenses 254,591.11 243,367.00
Printing and Publication
Expenses 0.00 17,380.21
Representation Expenses 197,562.05 146,400.90
Rent/Lease Expenses 133,682.50 61,120.00
Membership Dues and
Contributions to Organizations 52,548.00 55,476.50
Subscription Expenses 13,900.00 8,100.00
Donations 287,172.97 375,012.18
Other Maintenance and
Operating Expenses 3,851,911.89 2,095,744.64
Total Other Maintenance and
Operating Expense 4,791,368.52 3,002,601.43
Total Maintenance and other
Operating Expense 39,023,892.29 35,316,867.74
20. Non-Cash Expenses
This consists of the following:
2017 2016
Depreciation-Land Improvements 495,281.62 449,352.36
Depreciation-Infrastructure Assets 7,649,973.02 6,276,185.73
Depreciation-Buildings and Other Structures 1,519,173.46 958,604.44
Depreciation-Machinery and Equipment 3,995,751.87 3,084,648.63
Depreciation-Transportation Equipment 1,285,748.36 1,004,555.45
Depreciation-Furniture, Fixtures and Books 483,630.66 372,324.11
Total 15,429,558.99 12,145,670.72
21. Financial Expenses
2017 2016
Interest Expense 614,571.00 720,543.27
Other Financial Charges 31,790.47 981,991.56
Total 646,361.47 1,702,534.83
PART II
AUDIT OBSERVATIONS AND
RECOMMENDATIONS
Audit Observations and Recommendations
__________________________________________________________________
19
AUDIT OBSERVATIONS AND RECOMMENDATIONS
A. Financial and Compliance Audit
1. Property Plant and Equipment amounting to P172,324,513.54 could not
be ascertained as to its existence, validity and accuracy due to the non-
conduct of physical count contrary to Sec. 490 of GAAM Volume 1,
thereby casting doubt on the fairness of the financial statements’presentation.
“Chiefs of agencies are required to take a physical inventory of all the
equipment and supplies belonging to their respective offices at least once a
year, unless otherwise determined by the COA Chairman in specific cases.
Such inventory shall be made as of December 31x.x.x, and submitted to the
Auditor not later than January 31 of each year, unless extended by the
Chairman, Commission on Audit, upon prior request of the chief of agency
concerned. x.x.x”1 (Underscoring Supplied).
“Report on the Physical Count of Property, Plant and Equipment
(RPCPPE). The Report on the Physical Count of Property, Plant and
Equipment (Appendix 63) shall be used to report the physical count of
property, plant and equipment by type as of a given date. It shows the
balance of property and equipment per cards and per count and
shortage/overage, if any.” 2
As of December 31, 2017, Property, Plant and Equipment accounts as
presented in the Financial Statements (FS) aggregated to P172,324,513.54.
Evaluation of the property management system of the District
disclosed that the physical count of PPE for year 2017 was not conducted and
the annual report of District’s Property Plant and Equipment was not
submitted to the Audit Team as of this date. Verification and validation
revealed that prior years’ reports were not also furnished to auditor. In
addition, the schedule of depreciation of all the depreciable assets was not
prepared and submitted. These lapses will cause difficulty in determining the
composition/ classification and the valuation of PPE accounts and whether the
PPE were indeed properly, completely and accurately reflected and reported
in the FS.
Upon our follow-up with the concerned personnel regarding the
matter, they said that the physical count is on-going. The absence of the
current and prior year’s report as of this date is an indication of weakness of
monitoring controls on the property management system of the District.
1 Section 490a. of the Government Accounting and Auditing Manual (GAAM), Volume I
2 Section 66, Volume 2 of the New Government Accounting System (NGAS) Manual
Audit Observations and Recommendations
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20
Hence, the safeguard of government assets from any loss or improper
utilization cannot be fully assured.
The annual report on the physical count of the Property, Plant and
Equipment is very vital in overseeing the overall operating assets of the
district which is then being reconciled to the accounting department to ensure
fair presentation on the financial statements for the best interest of the
stakeholders.
We recommended and Management agreed to: a) require the
Property Department to constantly monitor and prepare the necessary
reports vis-à-vis physical count of PPEs in conformity with the above
mentioned provisions; b) cause regular reconciliation of records between
the Property Unit and the Accounting Division to detect errors, if any and
effect necessary correction in the affected records for the fair
presentation of PPE accounts in the Financial Statements.
2. Unserviceable Properties reclassified to Other Assets account totaling
P2,423,941.19 were not adequately supported with required reports and
were not disposed of as of the appropriate time contrary to Section 64,
Volume II of the NGAS Manual, Section 79 of PD 1445 and COA
Circular No. 89-296, thus exposing them to further physical
deterioration, decline in economic value and depriving the government
from the potential benefits had the immediate disposal of these properties
been effected.
In conformity with the existing standards, Property Plant and
Equipment (PPE) is said to be unserviceable if it is no longer capable of
providing the entity with future economic benefits or service potential.
Section 64, Volume II of the New Government Accounting System (NGAS)
Manual specifically provides that the Inventory and Inspection Report of
Unserviceable Properties (IIRUP) shall be used as basis to record dropping
from the books the unserviceable properties carried in the Property, Plant and
Equipment accounts.
Section 79 of P.D. 1445 states that:
“When government property has become unserviceable for any cause,
or is no longer needed, it shall, upon application of the officer accountable
therefore, be inspected by the head of the agency or his duly authorized
representative in the presence of the auditor concerned and, if found to be
valueless or unsalable, it may be destroyed in their presence. If found to be
valuable, it may be sold at public auction to the highest bidder under the
supervision of the proper committee on award or similar body in the presence
of the auditor concerned or other duly authorized representative of the
Commission, x xx. In the event that the public auction fails, the property may
Audit Observations and Recommendations
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21
be sold at a private sale at such price as may be fixed by the same committee
or body concerned and approved by the Commission.”
Further, pertinent provisions of COA Circular No. 89-296 dated
January 27, 1989 provides the following:
“IV. AUTHORITY OR RESPONSIBILITY FOR PROPERTY
DISPOSAL/DIVESTMENT
Pursuant to existing laws on the matter, the full and sole authority and
responsibility for the divestment or disposal of property and other assets
owned by national government agencies or instrumentalities, local
government units, and government-owned and/or controlled corporations and
their subsidiaries shall be lodged in the heads of the departments, bureaus,
and offices of the national government, the local government units, and the
governing bodies or managing heads of government-owned or controlled
corporations and their subsidiaries conformably to their respective corporate
charters or articles of incorporation, who shall constitute the appropriate
committee or body to undertake the same.
VI. AUDIT PROCEDURE: -
A. To facilitate audit of the disposal/divestment of corporate assets as
herein contemplated, the management of the government corporation
concerned shall furnish the Auditor at least twenty (20) days before the
advertisement of the call to public auction with a copy each of the following
documents:
a) Program for disposal with time schedules;
b) Inventory Report showing the itemized list and complete description of the
assets;
c) Appraisal Report showing the appraised values of the assets, prepared by
an in house and/or independent appraiser;
d) Disposal procedure adopted.
which are prepared by the concerned offices/departments of the corporation
and submitted to the proper Disposal Committee or similar body constituted
by the management thereof.”
Evaluation of the District’s property management system disclosed
that unserviceable properties that had been reclassified to Other Assets-Non-
Current account were not supported with the Report on Physical Count of
Property, Plant and Equipment (RPCPPE) and the Inventory and Inspection
Report of Unserviceable Properties (IIRUP). The RPCPPE and the IIRUP for
the current year including those of prior years were not made available to the
Audit Team for verification as to the correctness of valuation of the assets as
well as their existence and current condition. These reports could have
Audit Observations and Recommendations
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22
provided adequate information as to the condition of the properties as well as
their historical cost, date of acquisition and the related accumulated
depreciation and other vital information as basis in determining the proper
disposition of unserviceable properties.
Review of the Statement of Financial Position of the District for the
years 2015 to 2017 revealed a significant amount in the Other Assets-Non-
Current account as shown below:
Particulars
Year-end balance as of
Dec. 31, 2017 Dec. 31, 2016 Dec. 31, 2015
Other Assets-Non-
Current ₱27,070,109.83 ₱25,354,807.53 ₱25,354,807.53
The District’s Notes to Financial Statements disclosed that the above
account consists of Items in Transit and Other Assets which include
unserviceable and idle PPE. From the above data, it is apparent that this
particular account along with its huge amounts was already extant even in the
previous years and even posted an increase of P1,715,302.30 in the current
year. This only shows that there was no action made as to the disposal of the
unserviceable properties. Per our interview conducted to the property
officer/storekeeper, he admitted the lapses due to the insufficiency of
personnel to handle the property department. Because of this, they only
conduct the inventory taking of the unserviceable properties when there is a
schedule of disposal. He also admitted that they are aware that the property
records do not have a proper reconciliation with the accounting records.
The District’s lapses in the property management system could affect
efficient monitoring of the District’s assets and may cause delay in decision-
making as to the proper disposition of assets that are identified as idle or
unserviceable properties. The non-disposal of these assets on the appropriate
time could result to further deterioration of the properties, decline in
economic value and depriving the government from the potential benefits had
the immediate disposal of these properties been effected.
We recommended and Management agreed to:
a. take appropriate action on the insufficiency of personnel in the
Property Department in order to enhance the monitoring system on
asset utilization, reporting and disposal;
b. instruct the Property Department and the Inventory Committee to
initiate the conduct of physical count of PPEs and prepare the Report
on Physical Count of PPE in order to determine the actual existence
and condition of the properties and shall be used as basis of
reconciliation of records with the Accounting Unit;
Audit Observations and Recommendations
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23
c. instruct the Property Unit and the Appraisal & Disposal Committee
to conduct the physical count of unserviceable properties, prepare the
Inventory and Inspection Report of Unserviceable Properties and
undertake immediate disposal of unserviceable properties in
accordance with the procedures prescribed under Section 79 of
Presidential Decree 1445 and COA Circular 89-296; and
d. instruct the Accounting Unit to record the disposal of unserviceable
properties by dropping from the books of accounts the related Asset
accounts.
3. Eighty Six (86) disbursement vouchers for CY 2017 in the total amount of
₱11,559,456.23 were not submitted to COA for mandatory post audit and
custody contrary to Sections 100 and 122 of PD 1445 and COA Circular
Nos. 2009-006 and 95-006, hence Management’s assertions of occurrence,
accuracy, validity and completeness of financial transactions cannot be
ascertained and thereby depriving the end users of the financial
statements on the timely and relevant information.
Reports of disbursing officers in a government agency. Disbursing officers in
any government agency shall render monthly reports of their transactions
pursuant to regulations of the Commission to be submitted not later than the
fifth day of the ensuing month to the auditor concerned who shall conduct the
necessary examination and audit within thirty days from receipt thereof. 3
Submission of reports. Whenever deemed necessary in the exigencies of the
service, the Commission may under regulations issued by it require the
agency heads, chief accountants, budget officers, cashiers, disbursing officers,
administrative or personnel officers, and other responsible officials of the
various agencies to submit trial balances, physical inventory reports, current
plantilla of personnel, and such other reports as may be necessary for the
exercise of its functions.
(2) Failure on the part of the officials concerned to submit
the documents and reports mentioned herein shall
automatically cause the suspension of payment of their
salaries until they shall have complied with the requirements
of the Commission.4
COA Circular No. 2009-006 dated September 15, 2009 provides
that:
3Section 100, Presidential Decree (PD) No. 1445
4Section 122, PD No. 1445
Audit Observations and Recommendations
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24
“Sec 7.1.1The head of the agency, who is primarily
responsible for all government funds and property
pertaining to his agency, shall ensure that:
(a) the required financial and other reports and
statements are submitted by the concerned agency
officials in such form and within the period
prescribed by the Commission; x xx
“Sec 7.2.1 The Chief Accountant, Bookkeeper and
other authorized official performing accounting
and/or bookkeeping functions of the audited agency
shall ensure that : a) the reports and supporting
documents submitted by the accountable officers are
immediately recorded in the books of accounts and
submitted to the auditor within the first ten (10) days
of the ensuing month:”
COA Circular 95-006 dated May 18, 1995 also states that:
“6.04 Disbursing officers in particular shall faithfully comply with Section
100 of Presidential Decree No. 1445 which require them to render
monthly reports of their transactions pursuant to existing auditing
regulations not later than the fifth day of the ensuing month to the
auditor concerned.
6.05 The officials involved in the daily recording of transactions in the books
of accounts shall turn over the receipts and the disbursement records
with all paid vouchers and documents evidencing the transaction to the
Auditor within ten (10) days from date of receipt of said documents.”
Based on the monthly report of Disbursement for the period January to
December 2017, the SKWD processed a total of 2,119 check vouchers in the
aggregate amount of ₱121,120,612.48.
Our audit and verification on the submitted disbursement vouchers
revealed that only 2,032vouchers or 95.80 percent were submitted while the
86vouchers or 4.23 percent of the total vouchers were not yet submitted to
COA for post audit. Interview with the agency personnel disclosed that the 86
paid vouchers were not yet submitted to the accounting department due to lack
of supporting documents.
In the exit conference, Management commented that out of the 86
unsubmitted check vouchers, 35 vouchers were already on their hands and the
remaining 51 vouchers are still to be located. They further said that they will
be implementing strict procedures regarding the payment to the suppliers that
Audit Observations and Recommendations
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25
issue delayed receipts which causes the delayed completion of the required
documents which will submitted to the COA office for post audit purposes.
The incomplete submission of disbursement vouchers and their
supporting documents precluded the conduct of review, examination and post
audit of the said transactions, hence Management’s assertions of occurrence,
accuracy, validity and completeness of financial transactions cannot be
ascertained. Likewise, the end users of the financial statements were deprived
of the timely and relevant information needed in decision making.
We recommended and Management agreed to:
a) cause the immediate submission of the 86 check vouchers with
complete supporting documents;
b) direct the accountable officer to monitor and ensure that the
required documents are readily available to support the
disbursement transactions; and
c) adhere strictly on the prescribed timeline in the submission of
disbursement vouchers with the supporting documents to the
Auditor pursuant to COA rules and regulations.
4. Deficiencies in Public/Competitive Bidding procedures due to non-
adherence to the Government Procurement Reform Act (RA 9184) and
its Implementing Rules and Regulations were observed, thereby casting
doubt to the propriety and regularity of procured goods and services
totaling ₱19,783,642.20.
32.2. For the procurement of Goods and Infrastructure Projects, the BAC
shall evaluate the financial component of the bids to determine the
Lowest Calculated Bid using the following steps:
32.2.1. The BAC shall immediately conduct a detailed evaluation of all
bids using non-discretionary criteria in considering the following:
a) Completeness of the bid. Unless the Instructions to Bidders
specifically allow partial bids, bids not addressing or providing
all of the required items in the Bidding Documents including,
where applicable, bill of quantities, shall be considered non-
responsive and, thus, automatically disqualified. In this regard,
where a required item is provided, but no price is indicated, the
same shall be considered as non-responsive, but specifying a
zero (0) or a dash (-) for the said item would mean that it is
being offered for free to the Government, except those required
by law or regulations to be provided for; and
Audit Observations and Recommendations
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26
b) Arithmetical corrections. Consider computational errors and
omissions to enable proper comparison of all eligible bids. It
may also consider bid modifications if expressly allowed in the
Bidding Documents. Any adjustment shall be calculated in
monetary terms to determine the calculated prices. 5
The Lowest Calculated Bid/Highest Rated Bid shall undergo post-
qualification in order to determine whether the bidder concerned complies
with and is responsive to all the requirements and conditions as specified in
the Bidding Documents. 6
The post-qualification shall verify, validate, and ascertain all statements made
and documents submitted by the bidder with the Lowest Calculated
Bid/Highest Rated Bid, using non-discretionary criteria, as stated in the
Bidding Documents. 7
The post-qualification process shall be completed in not more than twelve
(12) calendar days from the determination of the Lowest Calculated
Bid/Highest Rated Bid. In exceptional cases, the post-qualification period may
be extended by the HoPE, but in no case shall the aggregate period exceed
forty-five (45) calendar days for Goods and Infrastructure Projects, or thirty
(30) calendar days in Consulting Services. 8
To enhance the transparency of the process, the BAC shall, during the
eligibility checking, shortlisting, pre-bid conference, preliminary examination
of bids, bid evaluation, and post-qualification, invite, in addition to the
representative of the COA, at least two (2) observers, who shall not have the
right to vote, to sit in its proceedings where xxx:9
During the year 2017, the District was able to award eight procurement
contracts totaling ₱19,783,642.20 as a result of public bidding, details are as
follows:
Particulars Contract Cost Date
Awarded
Supply and Delivery of Two (2) Units Brand new
Generator Sets ₱2,035,000.00 12/28/2017
Supply and Delivery of One (1) Unit Brand new
Backhoe Loader 5,035,000.00 11/03/2017
Supply and Delivery of Brass, CI, GI Fittings &
HDPE Pipes (Lot 4) 536,423.95 11/21/2017
5Section 32.2 of the Revised Implementing Rules and Regulations (IRR) of Republic Act (RA)
No. 9184 6Section 34.1 of the Revised IRR of RA 9184
7Section 34.3 of the Revised IRR of RA 9184
8Section 34.8 of the Revised IRR of RA 9184
9Section 13.1 of the Revised IRR of RA 9184
Audit Observations and Recommendations
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27
Particulars Contract Cost Date
Awarded
Supply and Delivery of 15mm Brass Water Meter 2,173,500.00 12/08/2017
Supply and Delivery of uPVC Pipes, DI Valves,
Various Fittings & Hardware Materials 5,700,888.00 08/23/2017
Supply and Delivery of Brass Fittings (Lot 1) 2,969,291.75
No Notice of
Award on File
Supply and Delivery of Cast Iron (CI) Fitting (Lot
2) 508,937.50 12/08/2017
Supply and Delivery of Galvanized Iron (GI)
Fittings (Lot 3) 824,601.00 12/08/17
Total ₱19,783,642.20
Audit of the above transactions disclosed the following deficiencies:
a) there is no bid evaluation report, TWG report or any form of
documentation that will prove that the BAC conducted a detailed
evaluation to assess the completeness of the bid and arithmetical
corrections (Section 32, IRR);
b) documents requested for post qualification assessment do not bear the
stamped date received, hence compliance with the prescribed
reglementary period (three calendar days from receipt by the bidder of the
notice from the BAC) of submitting such documents cannot be verified;
c) the BAC did not conduct a complete detailed post qualification assessment
using non-discretionary criteria. Although the BAC prepared a post
qualification report, but this was not comprehensive enough and not
supported with any documentation/report and/or supporting documents
(e.g. inspection reports, travel orders, certifications, etc) that the post-
qualification assessment was conducted by TWG, as reviewed and
approved by BAC evidencing: (Section 34, IRR of RA 9184);
i. Validation of the authenticity of the documents submitted (licenses,
certificates, permits, tax records) and information thereon;
ii. Verification of availability and commitment, and/or inspection and
testing for the required capacities and operating conditions, of
equipment units to be owned/leased/under purchase by the bidder for
use in the contract under bidding, as well as checking the
performance of the bidder in its on-going government and private
contracts (if any of these on-going contracts shows a reported
negative slippage of at least fifteen percent (15%), or substandard
quality of work as per contract plans and specifications, or
unsatisfactory performance of the contractor’s obligations as per
contract terms and conditions, at the time of inspection, and if the
BAC verifies any of these deficiencies to be due to the contractor’sfault or negligence, the agency shall disqualify the contractor from
the award), for the procurement of infrastructure projects;
Audit Observations and Recommendations
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28
iii. To verify, validate and ascertain the bid price proposal of the bidder
and, whenever applicable, the required committed Line of Credit in
the amount specified and over the period stipulated in the Bidding
Documents, or the bidder’s NFCC to ensure that the bidder can
sustain the operating cash flow of the transaction; and
iv. Verification and validation of the bidder’s stated compliance with
existing labor laws and standards, specifically compliance with a)
minimum wage rate b) regular remittance of premium to SSS,
Philhealth and PAG-IBIG c) has been finally adjudged by a court of
competent jurisdiction to have violated any labor law or social
legislation. (GPPB Circulars 01-2008 and 01-2012)
In addition, we observed that the post qualification assessment
appeared to have been conducted only for a day, which is not possible
considering that some suppliers are not located within the area, and that
validation and verification of the statements made and the documents
submitted cannot be possibly completed within the day (Section 34.8 of
the Revised IRR of RA 9184);
d) Observers were not invited in all stages of the procurement activities.
Record shows that observers were only invited during the pre-bid
conference, and opening and preliminary examination of bids stages
(Section 13.1 of the Revised IRR of RA 9184);
e) pre-procurement process were not done, the BAC is mandated to hold a
pre-procurement conference on each and every procurement, except those
contracts costing Two Million Pesos (P2,000,000.00) for procurement of
goods as provided in the IRR;
f) the management failed to assure that the winning bidder had paid its latest
business tax during the post-qualification process of two public bidding
proceedings; and
g) various documentary requirements (see Annex A) were not submitted to
the COA Auditors and were not found on file.
The above lapses in the procurement process cast doubt to the
propriety and regularity of the procurement transactions of the District during
the year. This is a reiteration of the previous year observation as rectifications
of various deficiencies were not yet acted upon.
We recommended and Management agreed to ensure that all
procurement transactions/activities pertaining to Competitive/Public
Bidding are in accordance with the prescribed procedures as stipulated in
the 2016 Revised Implementing Rules and Regulations of RA 9184.
Audit Observations and Recommendations
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29
5. Contracts, Purchase Orders and all other documents forming part
thereof were not submitted on time for auditorial review contrary to
COA Circular No. 2009-001, thus casting doubt on the propriety and
reasonableness of the procurement transactions and depriving the
Management from the prompt information on the results of auditorial
review, technical evaluation and inspection.
Within five (5) working days from the execution of a contract by the
government or any of its subdivisions, agencies or instrumentalities, including
government-owned and controlled corporations and their subsidiaries, a copy
of said contract and each of all the documents forming part thereof by
reference or incorporation shall be furnished to the Auditor of the agency
concerned.10
A copy of any purchase order irrespective of amount, and each and
every supporting document, shall within five (5) working days from issuance
thereof, be submitted to the Auditor concerned. Within the same period, the
Auditor shall review and point out to management defects and/or deficiencies,
if any xxx.11
As per verification, copies of eight (8) perfected contracts and related
supporting documents were not submitted within the prescribed period due to
lack of required supporting documents. The number of days delayed ranges
from one to sixty-six (66) days. Also, the Purchase Orders from January to
December 2017 were not submitted to the office of the Auditor thereby
casting doubt and uncertainties over these transactions.
Inquiry with the Management disclosed that the agency’s delayed
processing, recording and reporting are the main cause of the delayed
submission of the said Contracts and/or Purchase Orders to the Auditor. These
lapses hinder the Auditor to conduct timely review on the legality of the
procurement contract as well as the inspection as to the existence of the
projects and/or supplies/materials, thus defects on government contracts, if
any cannot be detected and rectified on time. This may cast doubt on the
propriety and reasonableness of the procurement transactions and also deprive
the Management from the prompt information on the results of auditorial
review, technical evaluation and inspection.
We recommended and Management agreed to install measures
that will facilitate the timely submission of Contracts and/or Purchase
Orders together with the related supporting documents within the
10Section 3.1.1 of COA Circular 2009-001
11Section 3.2.1 of COA Circular 2009-001
Audit Observations and Recommendations
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30
reglementary period to facilitate auditorial review, technical evaluation
and inspection pursuant to COA Circular No. 2009-001.
6. Monthly Report of Accountability for Accountable Forms (RAAF) was
not prepared and submitted contrary to Section 68, Volume II of the New
Government Accounting System (NGAS) Manual and Section 98 of
Government Accounting and Auditing Manual (GAAM), thus resulting
in weak monitoring system on the movement and status of accountable
forms.
The Report of Accountability for Accountable Forms (Xxx) shall be
prepared by the Accountable Officer to report on the movement and status of
accountable forms in his possession. The accountable forms include those
with or without face value.12
Accountable Officers shall render a report to the COA Unit Auditor on
their accountability for accountable forms at least once a month in the
prescribed form. Such report shall also be prepared in case of transfer of office
or accountability by the accountable officer. The report shall include, among
others, the name/type, quantity and serial number and/or value, of the
accountable forms as of last month/period, the forms received and issued
during the month/period and the balances as of end of month/period.13
The Monthly Report of Accountability for Accountable Forms
(RAAF) shows the flow of receipt and issuance of accountable forms such as
the official receipts and commercial checks per month and determines the
quantity of the unissued/unused accountable forms as of the month-end. The
RAAF also serves as a control mechanism against unauthorized or unreported
usage of accountable forms.
During the conduct of cash examination, the Audit Team noted that the
monthly RAAF were not prepared and submitted. Four out of nine or 44.44%
of the Accountable Officers (AOs) do not prepare RAAF. Further, RAAF are
submitted only when requested. Interview with the AOs revealed that they are
not aware that the preparation and submission of the monthly RAAF is
mandatory, thus they failed to comply with the above cited COA regulations.
The inability of the AOs to prepare and submit the monthly RAAF is
an indication of weak monitoring system in the receipt and issuance of
accountable forms at the custody of the AOs. This will also cause difficulty in
the reconciliation of accountabilities for accountable forms and will affect the
reliability of the reported balances of inventory at the end of each period.
12Section 68, Volume II of the Manual on the New Government Accounting System (NGAS)
13Section 98, Volume II of the Government Accounting and Auditing Manual (GAAM)
Audit Observations and Recommendations
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31
We recommended and Management agreed to instruct the
Accountable Officers to strictly comply with the preparation and
submission of the monthly RAAF as basis for monitoring the movement
of accountable forms at their possession to ensure reliability of the
monthly balances of inventory.
B. Performance Audit
7. The District registered an average Non-Revenue Water (NRW) of 16.06
percent for CY 2017 which is within the 20 percent acceptable level of
NRW as required under LWUA Resolution No. 444, series of 2009 and
LWUA Memorandum Circular No. 004-10.
“NOW, THEREFORE, BE IT RESOLVED, as it is hereby resolved, to
approve the immediate implementation in the reduction of the maximum
acceptable non-revenue water from the existing 25% to 20% applicable to all
Water Districts, effective upon its approval.” 14
In line with the above-cited Resolution, the Local Water Utilities
Administration (LWUA) has issued Memorandum Circular No. 004-10 dated
February 23, 2010 informing all local water districts that in order to accelerate
further improvement in the efficiency level, the maximum acceptable level of
Non-Revenue Water was reduced from 25% to 20% applicable to all Water
districts.In fact, the criteria for approval of financial assistance, water rate
adjustments, and performance evaluation of water districts shall include this
requirement.
Review of the accounts and operations of the District and verification
of the monthly data sheet disclosed the following data/information on revenue
producing water and non-revenue producing water percentages for the period
January to December 2017, as shown below:
14 Paragraph 3, LWUA Resolution No. 444, series of 2009 (adopted 15 September 2009)
Audit Observations and Recommendations
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32
As can be gleaned from the table above, the District was able to
operate within the acceptable level of NRW which was set by LWUA at 20%.
This is one of the manifestations of efficient utilization of the District’sresources. However, despite the commendable result of operations, it can be
noted that the tolerable 16.06% NRW still generates a material amount of loss.
This could have been used to further enhance the performance and overall
operation of the district had the loss been totally avoided or significantly
reduced.
Nevertheless, it can be comprehended though that it is a very difficult
task to completely avoid the wastage due to the various situations faced on the
operation such as possibilities of illegal connections, pilferages, defective
water meters, leakages and etc.
We commended Management for diligently maintaining its NRW
for CY 2017 within the acceptable level as prescribed by LWUA
Memorandum Circular. We recommended however, and Management
agreed to continue to exert more efforts in ensuring lower NRW rate
through (a) checking water meters and immediately replacing worn out
or defective ones; (b) ensuring immediate and prompt repair of
identified leaks; and (c) identifying and penalizing concessionaires who
do illegal tapping and permanently disconnect their water service.
The management commented that they are glad to be able to achieve a
favorable outcome on its NRW and assured the audit team that they will
continue to improve and install different measures to further improve their
NRW level and to eventually enhance their overall operation.
MonthProduction
(in cu. m.)
Billed/Revenue
Water
(in cu. m.)
Non-
Revenue
Water
(in cu. m.)
NRW % AllowableExcess of
NRW %
January 399,671.00 333,147.00 66,524.00 16.64% 20% -3.36%
February 413,268.00 331,377.00 81,891.00 19.82% 20% -0.18%
March 369,387.00 307,732.00 61,655.00 16.69% 20% -3.31%
April 411,401.00 345,059.00 66,342.00 16.13% 20% -3.87%
May 395,841.00 336,522.00 59,319.00 14.99% 20% -5.01%
June 417,700.00 351,010.00 66,690.00 15.97% 20% -4.03%
July 394,095.00 332,641.00 61,454.00 15.59% 20% -4.41%
August 415,749.00 350,251.00 65,498.00 15.75% 20% -4.25%
September 414,365.00 333,353.00 81,012.00 19.55% 20% -0.45%
October 393,314.00 334,693.00 58,621.00 14.90% 20% -5.10%
November 409,585.00 350,891.00 58,694.00 14.33% 20% -5.67%
December 400,464.00 351,516.00 48,948.00 12.22% 20% -7.78%
Total 4,834,840.00 4,058,192.00 776,648.00 16.06% 20% -3.94%
Audit Observations and Recommendations
__________________________________________________________________
33
Compliance to Tax Laws
Taxes withheld from the salaries and benefits of employees, payment for the
purchase of materials and services, franchise tax and other related taxes
amounting to P6,574,014.11 in CY 2017 were regularly withheld and
remitted to the BIR in compliance with Revenue Regulations No. 2-98 dated
April 17, 1998.
Analysis of the Due to BIR account of the District for CY 2017 disclosed that all
taxes withheld were regularly and promptly remitted to the BIR pursuant to the
above revenue regulations as presented below:
Months Due to BIR
(Beginning)
Taxes
Withheld
Taxes
Remitted
Due to BIR
(End)
January P 672,219.88 P 549,692.73 P 670,564.03 P 551,348.58
February 551,348.58 704,016.99 551,348.58 704,016.99
March 704,016.99 450,282.30 704,016.99 450,282.30
April 450,282.30 456,876.40 450,282.30 456,876.40
May 456,876.40 516,888.86 456,876.40 516,888.86
June 516,888.86 565,403.35 516,888.86 565,403.35
July 565,403.35 690,841.57 565,403.35 690,841.57
August 690,841.57 414,001.85 690,841.57 414,001.85
September 414,001.85 745,195.21 414,001.85 745,195.21
October 745,195.21 581,638.39 745,195.21 581,638.39
November 581,638.39 397,539.44 581,638.39 397,539.44
December 397,539.44 501,637.02 397,539.44 501,637.02
Total P 6,746,252.82 P 6,574,014.11 P 6,744,596.97 P 6,575,669.96
We commended Management for continuously withholding and
remitting taxes regularly to the BIR pursuant to the revenue regulations
Audit Observations and Recommendations
__________________________________________________________________
34
Compliance to GSIS Laws
The District complied with the obligation to deduct from officers and
employee’s compensation the mandatory employee’s contribution and the
corresponding employer’s share for CY 2017 and remitted the same to the
GSIS pursuant to Section 5 and 6, respectively, of RA No. 8291 or the
Revised Government Service Insurance Act of 1997.
Months Premium
Employer's
Share
Deduction Total Premiums
(Employer &
Employee’s Share) and
Loans
GSIS
Remitted
Due to GSIS
(Ending) Premium
Employee's Share
Loan Total
Deduction
January P 223,674.64 P 162,055.98 P 260,617.42 P 422,673.40 P 646,348.04 646,348.04 -
February 225,436.76 163,302.57 277,494.98 440,797.55 666,234.31 666,234.31 -
March 225,448.88 163,311.66 271,957.26 435,268.92 660,717.80 660,717.80 -
April 225,448.88 163,311.66 255,529.77 418,841.43 644,290.31 644,290.31 -
May 226,431.04 163,991.62 275,610.53 439,602.15 666,033.19 666,033.19 -
June 224,547.12 162,560.34 273,581.77 436,142.11 660,689.23 660,689.23 -
July 224,547.12 162,560.34 267,095.40 429,655.74 654,202.86 654,202.86 -
August 220,025.56 159,319.17 219,339.17 378,658.34 598,683.90 598,683.90 -
September 225,017.04 162,828.53 218,511.09 381,339.62 606,356.66 606,356.66 -
October 229,153.20 165,789.90 228,447.17 394,237.07 623,390.27 623,390.27 -
November 229,414.80 165,986.10 274,991.93 440,978.03 670,392.83 670,392.83 -
December 226,888.93 164,166.70 275,338.60 439,505.30 666,394.23 666,394.23 -
Total P2,706,033.97 P1,959,184.57 P3,098,515.09 P5,057,699.66 P7,763,733.63 P7,763,733.63 -
We commended Management for continuously withholding premiums
and loan payments and remitting them regularly to the GSIS pursuant to the
government insurance regulations.
Compliance to HDMF Laws
The District substantially complied with the provisions ofRule VII of
IRR 9679 dated July 21, 2009 and HDMF Circular No.275 dated January 22,
2010.
Audit of Due to HDMF account showed that the District withheld
employees’ share/loans and these were remitted including the employer’s share to
the HDMF. Based on the general ledger, the summary of the HDMF employees’and employer’s contributions withheld as well as the corresponding remittances
for CY 2017 is shown below:
Audit Observations and Recommendations
__________________________________________________________________
35
Months Premium Employer's Share
Deduction
Total Premiums and Loans
HDMF Remitted
Due to HDMF
(Ending)
Premium Employee's
Share Loan
Total Deduction
January P7,600.00 P 13,200.00 P 49,922.71 P 63,122.71 P 70,722.71 P70,722.71 -
February 7,700.00 14,800.00 53,918.27 68,718.27 76,418.27 76,418.27 -
March 7,700.00 14,800.00 54,118.27 68,918.27 76,618.27 76,618.27 -
April 7,700.00 14,800.00 51,899.05 66,699.05 74,399.05 74,399.05 -
May 7,800.00 14,900.00 45,569.75 60,469.75 68,269.75 68,269.75 -
June 7,800.00 14,900.00 45,569.77 60,469.77 68,269.77 68,269.77 -
July 7,800.00 14,900.00 53,436.67 68,336.67 76,136.67 76,136.67 -
August 7,600.00 14,700.00 46,888.41 61,588.41 69,188.41 69,188.41 -
September 8,100.00 15,200.00 49,859.30 65,059.30 73,159.30 73,159.30 -
October 8,100.00 15,200.00 46,433.13 61,633.13 69,733.13 69,733.13 -
November 8,100.00 15,200.00 39,805.85 55,005.85 63,105.85 63,105.85 -
December 8,000.00 15,100.00 39,805.85 54,905.85 62,905.85 62,905.85 -
Total P94,000.00 P 177,700.00 P577,227.03 P754,927.03 P848,927.03 P848,927.03 -
We commended Management for its continued adherence to rules and
regulation on HDMF Circular No. 275.
Status of Audit Suspensions, Disallowances and Charges as of Year-End
The total audit suspension, disallowances and charges found in the audit of
various transactions of the agency, as of December 31, 2017 is P3,302,952.20,
based on the Notice of Suspension (NS)/Notice of Disallowance(ND)/Notice of
Charge (NC) issued by this Commission, as summarized hereunder:
Particulars Suspensions Disallowances Charges
Summary of Audit Suspensions,
Disallowances and Charges as of
December 31, 2016
P0.00 P3,302,952.20 P0.00
Add: Issuances 0.00 0.00 0.00
Less: Settlements
Prior Year 0.00 0.00 0.00
Current Year 0.00 0.00 0.00
Balance, December 31, 2017 P0.00 P3,302,952.20 P0.00
PART III
STATUS OF PRIOR YEARS’UNIMPLEMENTED AUDIT
RECOMMENDATIONS
Status of prior years’ unimplemented audit recommendations_______________________________________________________________________________
36
STATUS OF PRIOR YEARS’ UNIMPLEMENTED AUDIT
RECOMMENDATIONS
Of the seven (7) prior year’s audit recommendations embodied in the Prior Years’Annual Audit Reports, four (4) were partially implemented and three (3) were fully
implemented, as detailed below:
Audit Observation Recommendation Ref
(AAR)
Status of
Implementa
tion
Reason for
Partial/ Non-
Implementation
1. The absence of
written policies
and procedures
on Water Meter
Calibration,
repair and
Replacement
Program may
likely lead to
risks of in
accurate water
metering and
inappropriate
decisions on
operations,
maintenance
and
procurement of
water meters,
hence may
negatively
affect the
District’sgeneration of
water sales
revenue.
We have recommended
that management develop
written policies and
procedures on Water
Meter Calibration, Repair
and Replacement
Program and ensure that
these are effectively and
efficiently implemented.
We further encourage the
District to request for the
accreditation of their
Testing and Calibration
Laboratory from PAB
and ensure that all
procured water meters
are tested and calibrated
by a PAB-accredited
calibration laboratory to
guarantee their accuracy.
2016 Fully
Implemented
2. The District’sdisbursement
transactions
totaling
P31,072,153,80
were not
adequately
supported with
relevant
documentary
requirement for
common
We have recommended
that Management instruct
the Accounting Unit to
provide the lacking
documents noted in this
audit and to strictly
comply with the
submission of the
required to support the
disbursement
transactions pursuant to
COA Circular No. 2012-
2016 Fully
Implemented
Status of prior years’ unimplemented audit recommendations_______________________________________________________________________________
37
Audit Observation Recommendation Ref
(AAR)
Status of
Implementa
tion
Reason for
Partial/ Non-
Implementation
government
transactions
provided under
COA Circular
2012-001 dated
June 14, 2013,
thereby casting
doubt on the
propriety and
regularity of the
transactions.
001. We have also
recommended to devise a
checklist of required
documents as guide in
checking if all the
necessary supporting
documents are present
before approving the
disbursements.
3. Deficiencies in
Public/Competit
ive Bidding
procedures were
observe due to
non-adherence
to the
Government
Procurement
Reform Act
(RA 9184) and
its
Implementing
Rules and
Regulations,
thereby casting
doubt to the
propriety and
regularity of
procured goods
and services
totaling
₱27,436522.47.
We have recommended
that Management ensure
that all
transactions/activities
pertaining to
Competitive/Public
Bidding are in
accordance with the
prescribed procedures are
stipulated in the 2016
Revised Implementing
Rules and Regulations of
RA 9184.
2016 Partially
Implemented Fully
implemented as
to documentary
requirements.
Procedures as
prescribed by
RA 9184 are
currently on the
process of
compliance.
4. The propriety
and legality of
various charges
imposed by the
District to its
concessionaires
cannot be
ascertained
because these
charges were
not subjected to
We recommended that
Management submit to
LWUA the various
imposed charges for their
review and approval to
establish compliance
with the provisions
prescribed under Section
63 of P.D. 198.
2015 Partially
Implemented
It was agreed
between SKWD
and LWUA for
the SKWD to
send personnel
to LWUA to
work hand in
hand with
LWUA to the
proposed rate
review. SKWD
Status of prior years’ unimplemented audit recommendations_______________________________________________________________________________
38
Audit Observation Recommendation Ref
(AAR)
Status of
Implementa
tion
Reason for
Partial/ Non-
Implementation
review and
approval of
LWUA as
provided under
Section 63 of
Presidential
Decree 198 as
amended.
personnel are
scheduled to
travel by July of
2018.
5. The necessity,
propriety and
legality of
hiring
Services/Job
Orders in the
District is
questionable
because Section
2 Rule XI of the
Omnibus Rules
implementing
Book V of
Executive Order
(EO) No. 292,
Section 209 to
211 and 517,
Volume I of the
GAAM were
not strictly
followed.
We recommended that
Management
recommend to the
Board of Directors to
issue policy
guidelines in the
hiring of job order in
accordance with
Section 2 Rule XI of
the Revised Omnibus
Rules Implementing
Book V of EO No.
292 and COA rules
and regulations cited
above;
plan and evaluate
further on how to
achieve the ideal and
realistic personnel
complement of the
District instead of
resorting to Job Order
as scheme:
evaluate the
performance and
skills of the said job
order personnel that
belongs to Category
II and III as provided
under Civil Service
Commission
Memorandum
Circular No. 10,
series of 2013 or the
Skills Eligibility for
possible appointment
to permanent regular
2015 Partially
Implemented
On process of
creating policy
guidelines on
Hiring of Job
orders and
Casual and
Scheduling of
Hiring and
Promotion for
the year 2018.
Converted
Position Items to
Plumber and
Instrument
Technician for
the year 2017
and filled up said
position of the
same year
(additional four
plumbers are to
be in permanent
position by June
2018)
Status of prior years’ unimplemented audit recommendations_______________________________________________________________________________
39
Audit Observation Recommendation Ref
(AAR)
Status of
Implementa
tion
Reason for
Partial/ Non-
Implementation
positions, if merited;
and
Prioritize hiring
plumbers of
regular status in
the District.
6. The existence,
accuracy and
validity of the
Accounts
Receivables and
Guaranty
Deposit Payable
accounts
totaling to P8.98
million and
P1.05 million,
respectively
cannot be fully
established due
to absence of
details and not
fully supported
with subsidiary
ledgers/schedule
s and the
existence of
Guaranty
Deposits
Payable totaling
to P1.05 million
which have
been dormant
for more than
five years affect
the true
financial
condition of the
District.
We recommended that
management,
Expedite the
installation of an IT
system that will link
the accounting
records with the
billing and collection
records.
Exert more effort to
locate all the
documents that will
support the balances
of the Guaranty
Deposits Payable
account;
Confirm from the list
of the creditors
whether the payables
are still valid and
legitimate obligation
of the agency
2014 Partially
Implemented
1. The SKWD
billing and
collection system
is on the process
of migration to
Integrated Utility
Management
Systems (IUMS)
from its old BC3
program.
2. The Tacurong
billing has been
pilot tested to
IUMS since
August 2017 and
now on its 95%
operational.
Isulan and
Esperanza billing
and Collection
will soon
migrate after the
completion of
Tacurong IUMS
together with
LAN connection
to Accounting
Section.
3. SKWD had
already
implemented
refund of
guaranty
deposition to
reconciled
accounts through
Status of prior years’ unimplemented audit recommendations_______________________________________________________________________________
40
Audit Observation Recommendation Ref
(AAR)
Status of
Implementa
tion
Reason for
Partial/ Non-
Implementation
adjustment in
their monthly
billings. As of
December 31,
2017, Guaranty
Deposit Payable
amounts
₱435,656.16.
4. The Finance
had sent letter of
confirmation of
SKWD accounts
balance as of
December 31,
2014 and had
made adjustment
and payments of
payables of more
than 5 years in
2015.
5. As of 2018
50% of the
Guaranty
Deposit Payable
accounts have
already been
offset.
7. No Internal
Audit
Service/Unit has
been created by
the agency
contrary to
Administrative
order Nos. 278
and 70 dated
April 28, 1992
and April 14,
2003,
respectively
This non
existence of
Internal Audit
We recommended that
the management organize
an IAS/IAU in
compliance with DBM
Budget Circular No. 204-
4 re: Guidelines on the
Organization and
Staffing of Internal
Auditing Units. We
would like also to remind
that it is the primary
responsibility of the
Head of the Agency to
install, implement and
monitor a sound system
if internal control as
2010 Cannot be
implemented.
Regulations
cited are
already
outdated
thus, not
applicable.
Deemed
complied as
to its status
of
implementati
on.
DBM circular
#2011-10 dated
November 18,
2011, The
Revised Local
Water District
Manual on
Categorization,
Re-
categorization
and Other
Related Matters
(LWD-Macro).
SKWD is
classified as
Category B
Status of prior years’ unimplemented audit recommendations_______________________________________________________________________________
41
Audit Observation Recommendation Ref
(AAR)
Status of
Implementa
tion
Reason for
Partial/ Non-
Implementation
Unit will pose a
risk of financial
irregularities
and
mismanagement
to the agency.
mandated under existing
COA and DBM issuance.
which Internal
Audit Service is
not included in
the Staffing
Pattern for Key
Positions.